Sluggish German demand and Brexit uncertainty contributed to a disappointing first half year for the shipping lines, as volumes from Asia to North Europe failed to keep up with other booming markets, but there are signs that things may be moving in the lines favour.
Container shipments from Asia to North Europe in the first six months of 2018 were almost identical to the first half of last year. The lack of any growth lies with the UK and Germany, who together account for 40% of inbound traffic from Asia.
Retail sales in Germany have been depressed, but analysts suggest the environment is likely to improve through the remainder of the year.
In the UK, consumer confidence is being undermined by a lack of clarity over Brexit’s impact on the economy, coupled with a rise in petrol prices, which have prompted households to take an increasingly cautious approach to borrowing and spending.
At the same time that demand has been muted, the introduction of new Ultra Large Container Vessels (ULCVs) over the last 12 months has increased the supply of westbound slots in the market by 10%.
Reacting to this excess supply and the lack of market growth Maersk Line is the first line to announce that it will suspend an Asia-North Europe service.
The leading 2M partner will remove the unspecified service in late September or early October in order to “balance our network in line with market requirements.” Subject to higher demand, the service could return in December, Maersk added.
The addition of some of the world’s biggest container ships at a time of weak demand is arguably bad economic planning by the lines, exacerbated further by the recent sharp spike in fuel costs that saw them impose emergency bunker surcharges, to try and claw back revenue.
As the peak season takes hold it is our view that the lines will improve ship utilisation, which means the market will move back towards the carriers and with more capacity reductions in the pipeline it is likely that rates will harden into the 4th quarter.